Brent crude futures declined $1.50, or 1.41%, to $104.55 a barrel, while US West Texas Intermediate (WTI) crude futures dropped $1.02, or 1.07%, to $94.07. Both benchmarks reversed gains made in the previous session.
WTI had climbed to a three-week high on Wednesday after the Houthis attacked Saudi Aramco’s headquarters and Iran said it was deploying new tactics to target ships in the Strait of Hormuz and keep oil prices elevated. A container ship and a dry bulk carrier sank near the strait in separate incidents within the past 24 hours after being struck by projectiles, maritime officials said on Wednesday.
Attacks around the waterway have intensified over the past 10 days, with Iran saying it was stepping up strikes in response to the US blockade of its ports and stricter sanctions imposed last month. The conflict has disrupted shipping and pushed freight costs to record highs, prompting the Trump administration to consider easing sanctions on so-called shadow fleet vessels that have transported oil and petroleum products from countries including Russia, Iran and Venezuela.
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Meanwhile, higher output from Russia and the Middle East has helped contain oil prices. Russia’s crude oil production increased by 65,000 barrels per day in September to 8.43 million barrels per day, although it remained 870,000 bpd below its year-earlier level, the International Energy Agency (IEA) said on Wednesday.
Where are prices headed?
Uncertainty over how the conflict will ultimately unfold remains a major concern for markets. JPMorgan analysts said they could not model the war’s eventual trajectory. At the start of the conflict, the bank had assumed the US administration would avoid crossing certain economic thresholds. Seven months into the war, many of those thresholds had been crossed, while a clear exit strategy remained absent.The threat of further supply disruptions has also raised the prospect of higher oil prices. Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks highlighted how disruptions to shipping could spread and intensify.
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Goldman Sachs has outlined a scenario in which oil prices could climb to $120 a barrel if attacks on vessels in the Middle East escalate. If exports return to normal, the bank expects prices to fall back towards $80 a barrel. Struyven said shipping risks had become a key driver of oil prices, adding that Goldman Sachs sees significant upside potential for crude. The bank also expects natural gas and refined product prices to rise, with supply shocks affecting gas and fuels larger than those in the crude oil market.
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